Hugo Boss sales rise as Europe recovery boosts demand

Sales at Hugo Boss rose by more than expected in the second quarter as a rebound in Europe and last year's relaunch of its website had an impact, although higher rebates weighed on its gross margin.

Net profit rose 13 per cent to €71 million, slightly ahead of analysts’ average estimate of €70 million. Sales rose 16 per cent to €647 million, well ahead of the average forecast of €631 million.

Hugo Boss said on Tuesday strong sales were driven by Europe, which saw currency-adjusted growth of 7 per cent, as sales in Britain rose at a double-digit rate and also picked up in most other countries on the continent. Online sales rose a currency-adjusted 34 per cent helped by the revamped website.

“Because of our strength in the European market, we expect the favourable trend to continue in the second half, even though conditions in the USA and China remain difficult,” chief executive Claus-Dietrich Lahrs said in a statement.

The luxury sector, which has been suffering from lower demand in China due to an anti-corruption campaign and economic slowdown, is showing signs of recovery elsewhere with other brands like LVMH and Kering's Gucci also reporting stronger sales.

Hugo Boss’s strategy of investing in expanding its own store network, is also paying off, with currency-adjusted sales in its own stores up 12 per cent, while wholesale sales fell 3 per cent.

That helped support profitability as it earns more from sales in its own stores than through other retailers’ shops, but higher rebates and negative inventory valuation effects dented the gross margin to 66.5 per cent from 66.7 per cent.

It said that meant the rise in its gross profit margin was likely to be lower than originally expected but confirmed it expects a mid single-digit percentage rise in currency-adjusted sales this year and earnings before interest, tax, depreciation and amortisation (EBITDA), adjusted for special items, to rise 5-7 per cent.

It also slightly lifted its expected capital expenditure target for the year to €220-240 million from a previous €200-220 million.

Reuters